CSR Donations to Registered Trusts Eligible for Section 80G Deduction: ITAT

The Income Tax Appellate Tribunal (ITAT), Delhi, has upheld that the voluntary CSR expenses paid to a charitable trust as a part of CSR (Corporate Social Responsibility) obligations can be claimed as a deduction under section 80G.

The assessee paid Rs 156.68 crores as a part of CSR obligations to the REC Foundation, which is a trust registered under sections 12A and 80G of the Income Tax Act. Later, this amount was voluntarily disallowed under Explanation 2 to Section 3(1) of the Income Tax Act, and the company only claimed a 50% deduction of Rs 78.34 crores under Section 80G of the Income Tax Act.

However, the AO disallowed this deduction, saying that the CSR expenses under section 135 of the Companies Act, 2013, were not voluntary. He concluded that the CSR expenses are mandatory and cannot be treated as a voluntary donation under Section 80G. As a result, the extra claim of Rs 78.34 crore was rejected by the AO.

The CIT(A) allowed the claim under section 80G, noting that CSR expenses are charitable in nature and do not involve receiving anything in return. The revenue challenged this decision before the ITAT.

The assessee contended that in the law, there is no exception mentioned regarding the ineligibility of deductions under section 80G(2)(iv) of the Act for contributions made as part of CSR obligations, except for the donations made to the Swachh Bharat Kosh and Clean Ganga Fund.

The Tribunal relied on the rulings in the cases of American Express (India) P Ltd (supra) and Ericsson India Global Services P Ltd (supra), where it was held that voluntary donations made to the registered charitable trusts under Section 80G can be claimed as deductions, even if they are made as a part of CSR obligations. Upholding the same, the tribunal dismissed the revenue’s appeal.